Re: Neoclassical Theory

I think the point was that the neoclassical theory says people make free choices based on what is best for them. Everyone is supposed to be rational in that way. Neoclassical theory also assumes that everything is based on fair and equal exchanges in the market place. Nobody ever gets cheated or hurt or abused. In other words, if we live in a world where everybody is equal and everybody knows everything they need to know to make exactly the right decision then they will make that decision. If that decision leads to them living in a cardboard box then that was their free choice.

: From the last class, I do not understand how the Neoclassical theory can say that someone living in a cardboard box is as happy as someone who is making millions per year. I understand that the Neoclassica theory says that the government is there only for the military power and protection purposes, but that seems a little far fetched for me. How can the governement not get involved with someone living in the streets. I'm sure that it was not their true desire to be homeless, to be without money and food. It was said, by saving your money from your hard work is how you make your happiness. But, again, I cannot see that the homeless people are really happy. The Neoclassical thoery says that the government shouldn't get involved, for if left alone the people will make the best maximizing decisions. But I do not think that it is true that if the government gets involved, it will mess everything up. There have been plenty of cases(maybe not as many as we would like to see) where the government has helped a homeless person, with welfare, job opportunities and shelter. This in turn has helped them get their life back on track, and from there the person can start making decisions as to better his/her life(making maximizing decisions). I totally disagree with the way the Neoclassical theory thinks about government. I do not think that it should be involved in everything in the sense that it's dictating the rules, but without the government, I think we would have a hard time living, especially those who need it's help.